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New Media for Transit Opportunities and challenges

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(1)

New Media for Transit

(2)

Agenda

• Background

• Ticketing vs. payment

• NFC

• Google Wallet

• Bank cards

• Open questions

2

(3)

Nanjing Delhi

Taipei, Taiwan HSR Mexico City Gran Canaria Dubai

Beijing Algiers Oslo Denmark Netherlands Paris Naples Turin Madrid Toronto Shenzhen Strasbourg Lisbon

Thales, 40 years of experience in fare collection systems

Bangkok Cairo

Kuala Lumpur Singapore

Taipei, Taiwan HSR Manila

Hong Kong Mexico City

Caracas

Rio de Janeiro Santiago

Sao Paulo

Gran Canaria Dubai Dominican Rep. Algiers Gautrain Shenzhen Auckland Saudi Arabia NSR

(4)

New actors are challenging the Transit industry

(5)

Mobility

The mobility technologies hold tremendous potential

How can they help transport authorities to solve the big

issues that underlie any fare management initiative:

Customer convenience

Accessibility

Accessibility

Social inclusion

Operator revenue assurance

Trust

(6)

Mobility, why is NFC slow to take off

Rivalry between economic buyers

(Mobile operators and issuers)

Ownership of the secure element, roles and responsibilities

Consumers have good enough payment methods

Payments demand simplicity, trust, reliability and low cost NFC requires download, Clicks, selection, PIN codes

6

Never achieved a critical mass of users.

NFC Business model is challenged by the number of enabled handsets Handset are chosen by the content and services they enable

Unlikely that mass deployment will come from ability to pay.

Transit

Emulations (Calypso, DESfire) are eventually there. Privacy protection?

(7)

For some time in a lot of e-ticketing projects a new magic word is born:

EMV

payment

•Presented as the paradigm solution for ticketing

•Answer to all complex ticketing requirements

•Requested by all RFP, even in the US

•Will likely be included in each and every NFC phones

Ticketing and payments

•Will likely be included in each and every NFC phones

Can ticketing be reduced to a simple payment act?

(8)

- Diversified offers as answer to clients segments & needs - Simple access to services: choice, buy, use

- Seamless travel with transport means (interoperability) - Customised fares by social clients profiles

- Operational feed back: collect, use data to offer a better service, sell data (?) - Providing real statistics for Operator & Authorities

- Security of the transactions (including payment)

What is provided by Public Transport

8

- Security of the transactions (including payment) - Managing peak of transactions & flows

- Loyalty program (Use or Quantity) - Privacy mobility

-Could payment services be able to… and for how much ?

Do P.T. customers need to become bank clients? No bank account = No travel ?

(9)

Transport industry move …People

Financial payment industry move ….Money

In the ISO business framework, (ISO24014)

Transport products are: access rights & associated fares (what you sell)

Payment means are not products.

They move the money from travellers to transit agencies

Ticketing vs. Payments

They move the money from travellers to transit agencies

Stored value is a transport product.

Loading a transport stored value is paying a product, whatever payment means is chosen by the customer

Debiting a transport stored value is using a product, no “money” moves, no payment.

(10)

Registrar Media Issuer Media Manufacturer Transport Operator Application Owner Media Owner Transport Provider Application Media Retailer Security Manager Collect and Forward Central System

Ticketing solutions structured by ISO 24014

SIM, Bank cards Banks MNO 10 Customer Customer Service Product Owner Reloading Agent Float Manager T-purse Owner Product Retailer Contactless Cards Provider Application Retailer

(11)

• Reload& purchase tickets anytime anywhere

• Avoid queues at reloading terminals

• Obtain Vouchers and cross marketed services on the fly • Remote security features

• Eliminate physical ticket distribution cost and operations

• Dynamic representation in wallet, branding, balance; logo’s

• Cross marketing opportunities, Bundles, ..

• Less –expensive- sales equipment

End user

Transit operator

NFC perspective in transit

• Remote security features • Dematerialize my cards and

present them in my handset wallet

• Add screen, keyboard and connectivity to my cards • NFC tag reading capabilities

• Less –expensive- sales equipment required, take advantage of Station real estate

• Eliminate direct cost of smart media • Enhanced branding opportunities • Link between physical and online

(12)

NFC Flavors

12

SE in the phone

Google Phone,

SE in the SIM

Any SWP based

phone

SE in the SD

Typhone, ..

(13)

Google Wallet

• As MNO and Banks seems not able to find any agreement, Google has launched his strategy. • Google Wallet is linking a payment card (Citi,

Google prepaid card or a gift card) to a phone • It is basically a PayPass (Magstripe profile, US

only) payment application.

• This PayPass application is running in a secure area of the Android based Google phone.

area of the Android based Google phone. • You will need to enable the Google wallet by

typing a pin code, before using it.

• Google claims it does not collect any fees on the transactions but profiles users.

• Offer loyalties and coupons with participating merchants

(14)

Why contactless Bank Cards in Transit

Customers

A single card does it all

No need to queue in line to buy fare rights Convenient solution for an occasional journey

Transit Authorities / Operators

No need to issue expensive Limited Use Fare Media to occasional travelers

Card issuance burden transferred to banks

14

Card issuance burden transferred to banks Card cost shared between all stakeholders

Banks

Reduced cash handling , displacing cash, seignorage

Acquire new customers (transit co-branded cards cheaper to deploy) New revenue stream with fees

(15)
(16)

Why Bank cards in transit appears complicated

New actors

(Payment schemes, Banks, ..)

with a major influence

For the Transit operators

Fare structure “forced” simplifications.

Fees structure imposed / negotiated from external entities Constraints and liability

PCI DSS, Chargeback, KYC, AML, CFT, ..

Validation speed

Adding strong key players such as Issuing and Acquiring banks

16

Adding strong key players such as Issuing and Acquiring banks

For Solution providers

Specifications imposed by external entities.

certifications, architectural changes, external specifications and constraints

Operating processes in line with the payment industry

PCI DSS

(17)

What cost will be displaced with bank cards

10 15 20 25 30 35 40 45 41 13 32 8 6

Transport for London shows that, today, it costs 14p to collect 1£ of revenue.

100 % = 14p

0 5 Infrastructure & management Revenue protection Product sales

Cust Info & Services

Smart card prod & distribution

How much of this could be eliminated Smart card prod & distribution < 1p (or 1%) With Bank cards, will the fees be below this?

(18)

Contactless Bank Cards use cases

“Retail mode” or flat fare

Fare is known upfront at check-in

Used in London TfL Busses for 2012 Olympics, Manchester, NYC, Paris subway trial,…

Mass Transit Extension in the card (SA NDoT card-centric system)

Fare products can be stored in the card.

Transit related “logs” (unsecured variable frame) can be used for fare computation.

18

Some fare rules may be difficult to achieve and will likely force simplifications.

Zero amount transaction (account-based system - back office centric)

Fare rules are processed in the back-office, thus any complex rule can be handled. NYC, with Master Card Risk management engine and Citi for US Online cards Will be used in London TfL Metro after the 2012 Olympics for EMV Offline cards All the current US RFP (now requiring EMV compliance)

(19)

Card terminal authentication is an EMV off-line authentication based on the

payment scheme security (PKI)

South Africa NDoT Card centric solution

Key Principle

Each transit operator takes ownership of one storage “vault”

He is free to define how to use it, within the NDoT specifications,

Available additional, free access, data storage will be used for fare computation

(20)

Bank card use case, Back Office Centric solution

Off line payment (0€) cryptogram

Fare amount computed at End Of Day from transit details

20

Issuing bank

•Shadow accounts •Personal accounts

No payments while travelling Float

Acquiring bank

(21)

Open questions, ticketing and payment

• Certification or type approval for every device still an issue.

• transit authority quote:

our margin are already thin, why let the banks in?

• The Payment association in the country need to agree on

the “Know Your Customer” and “Anti Money Laundering” constraints

• How to serve the unbanked or underbanked. Prepaid cards.

• In developing countries, the social benefits of financial

inclusion greatly outweigh the issues caused by the usage of prepaid cards.

(22)

Open questions, NFC

The handsets are coming

SIM or SD with transit card emulation are there.

Once the ecosystem is built (Handset, Google “mindset”, ..) it will start.

It seems that card contactless payment is a faster payment but NFC contactless

22

It seems that card contactless payment is a faster payment but NFC contactless payment will open up coupons, loyalties, offers etc that merchants want to pay for.

by holding your phone against something you are expressing your willingness to interact, effectively saying: “I want this”, whether it

information, a coupon or to purchase an item. This makes NFC technology much more powerful than any other form of mobile-based activity.

(23)

Convergence challenges

Global vs. local solutions

Payments are looking for a global solution

Public Transport are always unique and local

Existing infrastructure at PTO’s

Investment needed to update the infrastructure

Transition period

Transition period

Are PTO going to loose control

Lose prepaid credit amount – float

(24)

When dealing with Payment industry, make sure everything is

covered, fees, chargeback, claims, etc … by a joint pilot

References

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